Office market performed well in 2017 with new construction on the horizon

Posted on January 11, 2018

Average rental rates in St. Louis’ office segment ended 2017 at $19.97 per square foot, up nearly 2 percent over the average rate at the end of 2016.

During that same time period, according to Gershman Commercial Real Estate, vacancy rates across the metro area dropped from 12.5 percent to 10.7 percent, signaling a growing office market and continuing a trend seen for the better part of the last three years.

Vacancy rates in every area submarket decreased over the last 12 months. The Olive-270 and Westport submarket saw vacancy drop by three basis points while average rental rates increased from $20.22 per square foot to $20.87 per square foot.

“The economy is thriving and people are hiring more, which increases the amount of space companies need,” said Brandon Wappelhorst, an office broker with Sansone Group.

Wappelhorst said the tight market could lead to new construction beyond developments planned already, such as Centene’s $770 million campus expansion in Clayton.

According to CommercialCafé, a commercial real estate listings platform, two new office buildings — the new World Wide Technology headquarters in Westport and Delmar Gardens III in Chesterfield — added more than 330,000-square-feet of Class A office space in 2017. Roughly another 330,000-square-feet of Class A office space is expected to be delivered this year with the completion of Bunge’s new North American headquarters in Chesterfield and Wexford Science and Technology’s new Cortex building to be anchored by Microsoft.